Considering all that I wrote over the summer regarding this year’s record-high deficits, I thought it only fair to post the final numbers for the 2003 fiscal year.
This week, the Treasury Department announced the final tally on the deficit: $374 billion.
Administration critics noted that this is the biggest deficit in American history. The White House countered that it was less than had been previously estimated. Critics countered that the deficit more than doubled in just one year. The administration responded that the deficit is still smaller as a percentage of GDP than during the Reagan years.
Which of these claims is right? Well, they all are.
The previous record for the deficit was $290 billion, reached in the final year of the first President Bush’s term. The U.S. passed that record a few months ago.
But the administration is right about the deficit beating projections. Estimates a few months ago predicted we were on track for a deficit of over $400 billion. The White House considers it great news that the deficit wasn’t quite that high.
I realize that very little has gone right for the Bush administration, so they have to find small silver linings in all of the clouds they’ve created, but you’ll forgive me if I don’t find a $374 billion deficit cause for celebration. It’s like losing a ballgame 37 to 0 when it looked like you were going to lose 40 to 0. Is it better? I guess so, but it’s still really bad.
The administration’s favorite defense is noting the deficit’s percentage of the Gross Domestic Product. By this measurement, the modern record was in 1983, when Reagan’s trickle-down economic produced record-high deficits that reached 6 percent of GDP. In contrast, the 2003 deficit, while larger in size, is 3.5 percent of GDP.
This may be the White House’s favorite talking point, but obscures several key details.
First, the president promised the nation that he wouldn’t have any deficits during his presidency. This wasn’t true. Then he promised the deficits would be “small and short-term.” This was false as well.
Second, deficits at 3.5 percent of GDP may be better than Reagan’s budgets of the early 80s, but Bush’s Treasury Secretary, Tony Snow, described the budget deficit in 1995 as a “hole in the pocket of every American, every day of their lives.” He added that the deficit “threatens the very foundation of our culture.” What was the deficit in 1995? $164 billion. What was its percentage of GDP? 2.2 percent. If the Treasury Secretary believed that these relatively small deficits “threaten the very foundation of our culture,” how can he defend Bush’s record-high deficits?
And lastly, the $374 billion deficit for 2003 includes money from the Social Security surplus, which, in the 2000 campaign, Bush swore he wouldn’t touch. (So many broken promises, so little time.) When the 2003 deficit is considered without the Social Security surplus, it is 5.7 percent of GDP, the second-highest percentage since WWII.